It is official: IRS goes down to the first six echelons, see the new fees

Fhi published this Wednesday in Diário da República the decree-law that reduces the rates of the IRS up to the sixth echelon, as had already been announced by the Government. This relief will be felt already in the November salary – we explain how in this article. 

“ In line with the strategy and commitments made by the XXV Constitutional Government, a further reduction in the income tax of natural persons (IRS) occurs by reducing the rates applicable to the first six income steps. The reduction applies to incomes obtained in 2026, taking effect since 1 January. By virtue of the progressive nature of the tax, it benefits not only taxpayers whose income falls within the categories covered, but also taxpayers of the higher levels, from the share of income subject to the now reduced rates”, it can be read in the document the Executive. 

Thus, the new IRS rates become the following (can compare with the old here): 

The reduction applies to incomes obtained in 2026, taking effect since 1 January© Diary of the Republic

The government also states that “this measure, which corresponds to the fifth reduction of the IRS since April 2024, continues the path of relief of taxation on work and pensions initiated by the XXIV Constitutional Government and pursued by the XXV Government”.

More cash in November, but.. 

The wages and pensions paid in November will be more filled, since the government decided to reduce the retentions at the source this month, to reflect already in the portfolio of families the reduction of the IRS. However, you should know that several experts have already warned of a subsequent impact on the reimbursement of the IRS next year. 

“ Following the approval by Parliament of the new reduction of the IRS, with effect from 1 January 2026, the Government decided to reduce the withholding tax on labour income and pensions paid during the month of November, including the Christmas allowance due that month,” the Executive announced in a statement. 

This decision, he said, “occurs so that the families will immediately benefit from this descent and will not have to wait for the IRS to settle next year”.

The government further points out that, “in december, the retention tables at the current source are applied again“. 

The order of the Government fixing the final amount to be retained in November to reflect the interim decline of the IRS in 2026 was published in Diário da República, establishing that, in that month, the paying entities of wages and pensions, instead of collecting the usual percentage of IRS, retain only half of that amount.

As the cut applies both to the monthly salary and to the Christmas allowance, which is subject to separate retention, the amount of IRS to be delivered to the State in November for all the two salaries – salary and allowance – will be similar to that which under normal conditions would apply only to the monthly salary. The differences arise from rounding to which the retention rules comply.